In corner stores, bodegas, and mom-and-pop shops around the world, cash tends to be king. Everything an entrepreneur buys and sells, sets aside for the future, or uses as collateral is in cash.
That may seem like just an inconvenience: cash is slow, expensive, and insecure. For any business – particularly small businesses – that’s bad enough on its own.
But relying on cash has much wider, graver consequences than that. Depending on cash affects the storeowners, their employees, and their wider communities. Cash keeps small businesses out of the world’s formal financial sector: without tools that automatically record purchases, sales, and repayments, small business’ transactions remain invisible to financial institutions. That reliance even affects the financial service providers that serve small merchants, causing higher default rates, restricted lending, and more obstacles to others who want to open their own business.
If small businesses could use safer and quicker digital payments instead of cash, they could develop credit histories and receive formal financing to expand or hire more employees. Moreover, if merchants transact primarily using digital payments, then the customers who rely on them would be more motivated to as well. Those customers would then receive similar benefits, including developing their own credit histories and ensuring that their money remained secure.
To address these issues and give small merchants around the world the digital technology, services, and training they need to thrive, Mastercard and Accion are launching a first-of-its-kind partnership, bringing our worldwide networks and resources together to transform millions of undeserved micro and small businesses around the world.
Over the next four years, our insights, innovations and investments will reach up to 10 million people. We’ll help microbusinesses successfully operate in and benefit from the digital economy. By helping these entrepreneurs and the financial service providers that serve them, we expect to see further financial inclusion, economic growth, and job creation around the world.
The Mastercard Impact Fund is independently providing a separate, major grant to support this work. And Mastercard’s support extends well beyond the financial: its team will commit their time and expertise to help us understand the challenges that underserved microbusinesses face, and will develop solutions through research, data analytics, and R&D capabilities to refine the work that we do together.
We’ll also support the fintech startups that are creating a more inclusive digital ecosystem for micro merchants; Quona Capital, Accion Venture Lab, and Mastercard’s Start Path will leverage their combined effort to help ensure that the transformation of digital financial services benefits the undeserved.
Finally, we’ll work alongside the Mastercard Labs for Financial Inclusion and Humanitarian & Development unit to make programs like Kionect and the Mastercard Farmers Network more available in new markets.
If that seems like a lot of work, it is. This is a big problem, one that starts with but extends far beyond micromerchants. It affects entire communities, stalls social and economic development, and prevents people from reaching their economic potential. The solutions we use to address it should be just as large. The breadth and depth of Mastercard’s support provides us with the appropriate resources, expertise, and ability to provide millions of people with the financial tools they need to build better lives.
“Note: This article was updated to reflect a name change to the Mastercard Impact Fund, previously titled Mastercard Center for Inclusive Growth Fund.”